Response to November 23, 2021 Order — Oto Analytics v. Capital Plus Financial (Northern District of Texas)

Summary

Plaintiff's Response to This Court's November 23, 2021 Order, dated December 22, 2021, in Oto Analytics, Inc. d/b/a Womply versus Capital Plus Financial, LLC, Crossroads Systems, Inc., and Eric Donnelly, Civil Action No. 3:21-cv-2636-B, in the United States District Court for the Northern District of Texas. Womply argues that the Court has federal-question jurisdiction over its declaratory judgment claim and its state-law claims, and that Womply is not an "agent" under 13 C.F.R. § 103.1(a). The response states that Capital Plus funded more than 86,000 Womply-referred PPP loans and received approximately $187 million in processing fees from the SBA, and that Capital Plus and Blueacorn refuse to pay Womply for its referral or technology services. It is signed by Jason P. Bloom of Haynes and Boone, LLP.

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“Response to November 23, 2021 Order — Oto Analytics v. Capital Plus Financial (Northern District of Texas).” Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/17-response-filed-by-oto-analytics-inc-re-7-order-bloom-jason-m-a283f38a6b/, SHA-256 62cdd4034700e966fdfeb9d1dfcd1a536004f03ebf24529299950f53f6784854.

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Case 3:21-cv-02636-B Document 17 Filed 12/22/21 Page 1 of 22 PageID 225

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

OTO ANALYTICS, INC. d/b/a WOMPLY, §
§
Plaintiff, §
§
v. § Civil Action No. 3:21-cv-2636-B
§
CAPITAL PLUS FINANCIAL, LLC, §
CROSSROADS SYSTEMS, INC., and ERIC §
DONNELLY, §
§
Defendants.
§

PLAINTIFF’S RESPONSE TO THIS COURT’S NOVEMBER 23, 2021 ORDER

Alexander L. Cheney (admitted pro hac vice) Jason P. Bloom
Willkie Farr & Gallagher LLP Texas Bar No. 24045511
One Front Street Nina Cortell
San Francisco, CA 94111 Texas Bar No. 04844500
(415) 858-7400 Haynes and Boone, LLP
acheney@willkie.com 2323 Victory Avenue, Suite 700
Dallas, TX 75219
Mark T. Stancil (admitted pro hac vice) (214) 651-5000
Joshua S. Levy (admitted pro hac vice) jason.bloom@haynesboone.com
Willkie Farr & Gallagher LLP nina.cortell@haynesboone.com
1875 K Street, N.W.
Washington, D.C. 20006
(202) 303-1000
mstancil@willkie.com
jlevy@willkie.com

Attorneys for Plaintiff Oto Analytics, Inc.
d/b/a Womply

December 22, 2021
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TABLE OF CONTENTS

PRELIMINARY STATEMENT .....................................................................................................1

BACKGROUND .............................................................................................................................4

ARGUMENT ...................................................................................................................................8

I. THIS COURT HAS FEDERAL-QUESTION JURISDICTION OVER THIS
ACTION. .............................................................................................................................8

A. This Court Has Jurisdiction Over Womply’s Declaratory Judgment Claim. ..........8

B. This Court Has Jurisdiction Over Womply’s State-Law Claims. ..........................10

II. WOMPLY IS NOT AN “AGENT” UNDER 13 C.F.R. § 103.1(a). .................................13

CONCLUSION ..............................................................................................................................16

CERTIFICATE OF SERVICE ......................................................................................................18

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TABLE OF AUTHORITIES

Page(s)

Cases

Bd. of Comm’rs v. Tenn. Gas Pipeline Co.,
850 F.3d 714 (5th Cir. 2017) ........................................................................................... passim

Cmty. Health Sys. Prof.’l Servs. Corp. v. Hansen,
525 S.W.3d 671 (Tex. 2017)....................................................................................................10

Columbia Gas Transmission Corp. v. Drain,
237 F.3d 366 (4th Cir. 2001) .....................................................................................................9

Empire Healthchoice Assurance, Inc. v. McVeigh,
547 U.S. 677 (2006) ...........................................................................................................12, 13

Franchise Tax Bd. v. Constr. Laborers Vacation Tr.,
463 U.S. 1 (1983) .............................................................................................................3, 9, 10

Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg.,
545 U.S. 308 (2005) ...........................................................................................................10, 13

Gunn v. Minton,
568 U.S. 251 (2013) .....................................................................................................10, 11, 13

Noatex Corp. v. King Constr. of Houston LLC,
74 F. Supp. 3d 764 (N.D. Miss. 2014) .......................................................................................9

Samuel C. Johnson 1988 Tr. v. Bayfield Cnty., Wis.,
649 F.3d 799 (7th Cir. 2011) .....................................................................................................9

Singh v. Duane Morris LLP,
538 F.3d 334 (5th Cir. 2008) ...................................................................................................13

TNA Ent., LLC v. Ashenoff,
2009 WL 748236 (N.D. Tex. Mar. 20, 2009) ....................................................................3, 8, 9

Wilmot v. Bouknight,
466 S.W.3d 219 (Tex. App.—Houston [1st Dist.] 2015, pet. denied).....................................10

Statutes

28 U.S.C. § 1331 ..............................................................................................................................8

28 U.S.C. § 1367 ............................................................................................................................13

28 U.S.C. § 2201(a) .........................................................................................................................8

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Rules and Regulations

13 C.F.R. § 103.1(a).............................................................................................................3, 13, 14

13 C.F.R. § 103.1(b) ......................................................................................................................14

13 C.F.R. § 103.1(f) ...................................................................................................................4, 16

85 Fed. Reg. 20,811 (Apr. 15, 2020) ...........................................................................................2, 7

86 Fed. Reg. 3,692 (Jan. 14, 2021) ..............................................................................................2, 7

Other Authorities

SBA Standard Operating Procedure (SOP) 50 10 6,
effective October 1, 2020 ...............................................................................................4, 14, 15

Stacy Cowley & Ella Koeze, How Two Start-Ups Reaped Billions in Fees on
Small Business Relief Loans, N.Y. Times (June 27, 2021)........................................................6

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Pursuant to this Court’s November 23, 2021 Order (“Order;” ECF No. 7), Plaintiff Oto

Analytics, Inc. d/b/a Womply (“Womply”) respectfully submits this response (“Response”),

together with its proposed amended complaint (the “Amended Complaint” or “Am. Compl.”), to

Defendants’ subject-matter jurisdiction arguments, as set forth in Defendants’ Notice of Removal

(“Notice;” ECF No. 1).

PRELIMINARY STATEMENT

A central issue for this Court to resolve in this litigation is whether federal rules and

regulations promulgated by the United States Small Business Administration (“SBA”) prohibit

Womply from receiving the technology fees it earned for providing technology services to lender

Capital Plus Financial, LLC (“Capital Plus”) and its lender service provider BA Fin Orion, LLC

d/b/a Blueacorn (“Blueacorn”) in connection with the Paycheck Protection Program (“PPP”).

Womply provided its technology services and earned its technology fees pursuant to the Womply

Developer Order Form between Womply and Blueacorn, dated May 10, 2021 (the “Order Form;”

Am. Compl. Ex. 4; Notice Ex. E.) Separately, Womply earned referral fees for referring PPP loan

applications to Blueacorn, which referred the applications to Capital Plus for origination. Womply

provided these referral services and earned its referral fees pursuant to the separate PPP Loan

Referral Agreement between Womply and Blueacorn, dated May 10, 2021 (the “Referral

Agreement;” Am. Compl. Ex. 3; Notice Ex. E; together with the Order Form, the “Agreements”).

There does not appear to be any dispute among the parties that Womply’s referral fees are

consistent with SBA regulations.

Capital Plus funded more than 86,000 Womply-referred PPP loans to small businesses, for

which it received approximately $187 million in “processing fees” from the SBA plus interest on

the loans. In addition to using Womply’s PPP applicant referral services, both Capital Plus and

Blueacorn used Womply’s technology services to, among other things, review loan applications,

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organize and verify borrower information, communicate with the SBA and borrowers, fund PPP

loans, and perform other PPP loan portfolio management functions. Yet Capital Plus and

Blueacorn refuse to pay Womply for either its referral or technology services. Womply therefore

commenced litigation in Texas state court against Capital Plus, its parent Company Crossroads

Systems, Inc., and the former CEO of Capital Plus, Eric Donnelly (collectively, the “Capital Plus

Defendants”) and asserted claims for, among other things, tortious interference with contract and

fraudulent inducement. (See Plaintiff’s Original Petition (“Pet.”), ECF No. 1-4.)

The Capital Plus Defendants removed this action to this Court on the ground that

Womply’s claims raise a federal question—namely, whether the technology fees Womply earned

for providing its technology services exceed limits set forth in a rule promulgated by the SBA.

(Notice ¶ 4.) The rule states:

The total amount that an agent may collect from the lender for
assistance in preparing an application for a PPP loan (including
referral to the lender) may not exceed[] [o]ne (1) percent for loans
of not more than $350,000.

85 Fed. Reg. 20,811, 20,816 (Apr. 15, 2020); 86 Fed. Reg. 3,692, 3,709 (Jan. 14, 2021) (the “Agent

Fee Cap”).

In response, this Court directed Womply to submit briefing to “specifically address

(1) Defendants’ contention that construction of the PPP regulations and governing statutes will be

dispositive of an essential element of Womply’s state-law claims,” and “(2) whether Womply is

an ‘agent’ within the definition of 13 C.F.R. § 103.1(a).” (Order at 3.)

This Court Has Federal-Question Jurisdiction Over This Action. In the Amended

Complaint, Womply seeks a declaration that the SBA Agent Fee Cap does not apply to fees earned

for providing technology services, including the fees Womply earned for providing technology

services to Capital Plus and Blueacorn. A declaration of Womply’s “rights and liabilities” under

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“a federal [rule]” “‘necessarily present[s] a federal question.’” TNA Ent., LLC v. Ashenoff, 2009

WL 748236, at *2 (N.D. Tex. Mar. 20, 2009) (Boyle, J.) (quoting Franchise Tax Bd. v. Constr.

Laborers Vacation Tr., 463 U.S. 1, 19 (1983)) (denying motion to dismiss for lack of subject-

matter jurisdiction). Even as originally pled, this Court has subject matter jurisdiction because

Womply’s state-law claims raise an issue of federal law. An essential element of each of

Womply’s claims for tortious interference and fraudulent inducement is the existence of a valid

contract. Addressing these claims requires resolving the parties’ dispute about the validity of the

Agreements under federal SBA rules and regulations, which has substantial implications for

federal lending programs. “Supreme Court precedent is clear that a case arises under federal law

where ‘the vindication of a right under state law necessarily turn[s] on some construction of federal

law.’” Bd. of Comm’rs v. Tenn. Gas Pipeline Co., 850 F.3d 714, 721 (5th Cir. 2017) (quoting

Franchise, 463 U.S. at 9).

Womply Is Not An “Agent” Under 13 C.F.R. § 103.1(a). The SBA defines an “agent”

to mean an “authorized representative” of an “Applicant or Participant” or an entity “representing

an Applicant or Participant by conducting business with SBA.” 13 C.F.R. § 103.1(a). Womply is

not and was not an authorized representative of any Applicant or Participant, including Capital

Plus. Nor does Womply “conduct[] business with the SBA” on behalf of any Applicant or

Participant. Womply (i) referred PPP loan applications from borrowers, who submitted their own

information to Womply, to Blueacorn under the Referral Agreements, which referred them to

Capital Plus for funding, and (ii) provided Capital Plus and Blueacorn with access to its technology

platform under the Order Form, which enabled them to efficiently and cost-effectively process,

manage, and track all Womply-referred PPP loans. What is more, the SBA has expressly

announced—in a Standard Operating Procedure issued after the Agent Fee Cap rule on which

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Capital Plus purports to rely—that providing technology services to a lender does not make the

provider an “agent”: “SBA does not consider entities providing technology services that do not

include underwriting to be Agents.” SBA Standard Operating Procedure (SOP) 50 10 6, effective

October 1, 2020 (the “SBA SOP”) (emphasis added). Womply has not provided underwriting

services to Capital Plus or any other lender. Accordingly, Womply’s provision of technology

services to Capital Plus and Blueacorn did not make Womply an “agent.”

Importantly, an “Agent” is not the same thing as a “Referral Agent” under SBA regulations.

The SBA defines a “Referral Agent” as “a person or entity who identifies and refers an Applicant

to a lender or a lender to an Applicant.” 13 C.F.R. § 103.1(f). Womply’s referral of prospective

PPP loan applicants to Capital Plus, through Blueacorn as an intermediary, arguably falls within

that definition. But the Agent Fee Cap rule upon which Capital Plus relies does not reference the

defined term “Referral Agent,” nor does it limit all fees that an “Agent” may collect. Rather, it

limits “[t]he total amount that an agent may collect from the lender for assistance in preparing

an application for a PPP loan (including referral to the lender).” 86 Fed Reg. at 3,709 (emphasis

added). But even assuming the reference to “referral” encompasses Womply’s actions in referring

loans to Capital Plus, it is undisputed that the referral fees Womply earned for referral services

under the Referral Agreement were within the Agent Fee Cap.

BACKGROUND

In response to the COVID-19 pandemic, Congress enacted the PPP to authorize banks and

other lenders to make federally guaranteed and potentially forgivable loans to businesses, which

required connecting more than 10 million PPP loan borrowers with approximately 5,500 national

and local lenders. (Am. Compl. ¶¶ 1, 26, 35.) Despite lenders receiving lucrative processing fees

and interest for providing government-guaranteed loans under the PPP, many small businesses

found it difficult to find a lender willing to provide them with a PPP loan. (Id. ¶¶ 2, 34, 39.)

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Processing, managing, and tracking PPP loan applications was burdensome and complicated, and

many lenders were unable or unwilling to devote the required resources to funding small SBA

loans. (Id.) They instead focused on funding larger PPP loans in order to maximize the processing

fees and interest they would collect. (Id.) Womply addressed this problem by releasing a web-

based technology platform (the “Technology Platform”) that resulted in hundreds of thousands of

borrowers receiving small PPP loans. (Id. ¶¶ 3, 40–43; Pet. ¶ 2.)

Womply’s Technology Platform provided two distinct categories of services to lenders.

First, it provided lenders with PPP loan application referral services. The Technology Platform

contained a borrower-facing webpage that enabled potential PPP borrowers to submit their own

information, which Womply referred to its lender partners. Second, it provided lenders with

valuable technology services. The Technology Platform contained a separate lender-facing portal

through which its lender partners, among other things, reviewed applications to determine whether

applicants qualified for PPP loans and whether to fund the loans, submitted applications to the

SBA for approval, funded PPP loans, communicated with the SBA and applicants, and performed

other PPP loan portfolio management functions. (Am. Compl. ¶¶ 3, 40–43; Pet. ¶ 26.) Womply’s

lender partners also received numerous other technology services that were integrated in the

Technology Platform, including borrower information verification services, from third party

technology companies such as Twilio, Kickbox, Custmer.io, Salesforce, WordPress, Simple

Texting, Drift, Teslar Software, Plaid, Amazon Web Services, Guideline, FreshAddress, Inscribe,

Slack, Mindee, Ocrolus, DocuSign, and LexisNexis. (Am. Compl. ¶¶ 41, 64, 67.) With access to

all of these services in one Technology Platform, lenders that contracted with Womply had to do

little more than make underwriting decisions, determine whether to send loan applications to the

SBA, and fund the loans that the SBA approved, which made it economically feasible for lenders

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to provide and manage loans to the smallest businesses during the COVID-19 pandemic. (Id.

¶ 43.)

More than a dozen lenders contracted with Womply for its referral services and access to

the Technology Platform and its integrated technology services. (Id. ¶ 3; Pet. ¶¶ 2, 26.) Those

lenders are not large institutions or household names but, largely because of the services in

Womply’s Technology Platform, Womply’s lender partners nonetheless provided more than 1.4

million PPP loans totaling more than $20 billion in principal amount to small businesses across

the country. (Am. Compl. ¶¶ 2–3.) By one estimate, more than 7% of all PPP loans funded in

2021 were funded and managed using Womply’s Technology Platform.1

One of the lenders that used Womply’s referral services and Technology Platform is

Defendant Capital Plus. (Id. ¶¶ 55, 72, 154, 158; Pet. ¶¶ 2–3.) Womply provided Capital Plus

with referral services pursuant to the Referral Agreement and access to its Technology Platform

pursuant to the Order Form. Under the Referral Agreement, Womply is entitled to referral fees of

1% of the principal amount of each Womply-referred PPP loan that Capital Plus funds (the

“Referral Fees”). Under the Order Form, Womply is entitled to separate technology fees for

providing Capital Plus and Blueacorn with access to the Technology Platform and technology

services (the “Technology Fees”).

Using Womply’s Technology Platform and technology services, Capital Plus funded more

than 86,000 PPP loans—totaling more than $950 million in principal amount—for which Capital

Plus received approximately $187 million in fees from the SBA plus interest on the loans. (Am.

Compl. ¶¶ 5–6, 72, 76; Pet. ¶¶ 1, 34.) Womply is entitled to more than $9 million in Referral Fees

1
See Stacy Cowley & Ella Koeze, How Two Start-Ups Reaped Billions in Fees on Small
Business Relief Loans, N.Y. Times (June 27, 2021), https://www.nytimes.com/2021/06/27/
business/ppp-relief-loans-blueacorn-womply.html

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for its referral services under the Referral Agreement, and more than $67 million in Technology

Fees for the use of its Technology Platform under the Order Form. (Am. Compl.¶¶ 6, 79; Pet. ¶¶

41, 50.) But Capital Plus and Blueacorn have refused to pay Womply any fees for any of

Womply’s services. (Am. Compl. ¶¶ 5–7, 77–79, 88–93, 128, 161; Pet. 4–6, 46.) Capital Plus

contends that SBA regulations prohibit Womply from collecting more than 1% of the principal

amount of the PPP loans Capital Plus funded and managed using the Technology Platform. (Am.

Compl. ¶¶ 7, 68; Notice ¶¶ 28, 44.) In other words, Capital Plus contends that Womply may collect

only its Referral Fees, but not its Technology Fees (although neither Capital Plus nor Blueacorn

actually paid Womply any Referral Fees). (Am. Compl. ¶¶ 6–7; Notice ¶¶ 28, 44.)

The SBA rule that Capital Plus invokes in an attempt to deprive Womply of the fees it

earned states that the “total amount that an agent may collect from the lender for assistance in

preparing an application for a PPP loan (including referral to the lender) may not exceed . . . [o]ne

(1) percent for loans of not more than $350,000.” 85 Fed. Reg. at 20,816; 86 Fed. Reg. at 3,709.

This rule does not apply to Womply’s Technology Fees because, inter alia, neither Blueacorn nor

Womply is an SBA-regulated lender, so the SBA Agent Fee Cap does not apply to the Agreements

between Blueacorn and Womply, and the Agent Fee Cap applies only to fees for loan application

preparation and referral services, not to fees for separate technology services. (Am. Compl. ¶ 68.)

It is undisputed that Womply’s Referral Fees comply with this rule. (Id. ¶¶ 6–7; Pet. ¶ 31.) Yet

Capital Plus and Blueacorn refuse to pay Womply both the Technology Fees and the Referral Fees.

(Am. Compl. ¶¶ 6–7; Pet. ¶¶ 4–6, 46.) Capital Plus’s attempt to invoke this rule for the first time

in its Notice—more than a year after the SBA first issued it and months after Blueacorn and

Womply entered into the Agreements—is a blatant money grab now that the PPP program has

ended and Capital Plus has lost its main source of revenue. (Am. Compl. ¶¶ 44–54.)

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Accordingly, through this lawsuit, Womply seeks (i) a declaratory judgment that SBA rules

capping fees for PPP loan application preparation and referral services do not apply to fees for

technology services, including the Technology Fees charged by Womply; (ii) money damages,

including contractual fees and punitive damages; (iii) equitable relief, including disgorgement

and/or constructive trust; and (iv) reasonable attorneys’ fees and costs. (Id. ¶ 10.)

ARGUMENT

I. THIS COURT HAS FEDERAL-QUESTION JURISDICTION OVER THIS
ACTION.

This Court has “federal[-]question jurisdiction over any civil action that arises under the

federal constitution, statutes, or treatises.” Bd. of Comm’rs v. Tenn. Gas Pipeline Co., 850 F.3d

714, 721 (5th Cir. 2017) (internal quotation marks omitted); see 28 U.S.C. § 1331. Here, this

Court has federal-question jurisdiction over (i) Womply’s declaratory judgment claim regarding

the interpretation of federal SBA rules (infra Section I.A), and (ii) Womply’s state-law claims,

which necessarily require interpreting federal SBA rules (infra Section I.B).

A. This Court Has Jurisdiction Over Womply’s Declaratory Judgment Claim.

“The Declaratory Judgment Act authorizes federal courts to ‘declare the rights and other

legal relations of any interested party seeking such a declaration.’” TNA Ent., LLC v. Ashenoff,

2009 WL 748236, at *2 (N.D. Tex. Mar. 20, 2009) (Boyle, J.) (quoting 28 U.S.C. § 2201(a)).

Capital Plus asserts that Womply’s Technology Fees violate the SBA’s Agent Fee Cap and

is therefore withholding payment from Blueacorn, which in turn is withholding payment from

Womply. (See Notice ¶¶ 28, 44.) Accordingly, Womply is seeking a declaration from this Court

that SBA rules capping fees to “agents” do not apply to fees for technology services, including the

Technology Fees Blueacorn agreed to pay Womply for access to its Technology Platform. (See

Am. Compl. ¶¶ 116–20.) “Federal courts have regularly taken original jurisdiction over

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declaratory judgment suit” where, as here, “that suit would necessarily present a federal question.”

Franchise Tax Bd. v. Constr. Laborers Vacation Tr., 463 U.S. 1, 19 (1983); see, e.g., Noatex Corp.

v. King Constr. of Houston LLC, 74 F. Supp. 3d 764, 773 (N.D. Miss. 2014) (analyzing subject-

matter jurisdiction sua sponte and finding that the court “may exercise federal question jurisdiction

over the declaratory judgment action”).2

This Court’s decision in TNA is instructive. “TNA and Ashenonff entered into an

agreement” that included “a waiver, releasing TNA of liability for claims ‘that arise from or relate

in any way’” to the agreement. 2009 WL 748236, at *1. “Ashenoff threatened to sue under 42

U.S.C. § 1981,” and, “[i]n response to Ashenoff’s demand, TNA filed suit, seeking declarations

pursuant to the Declaratory Judgment Act[] regarding, inter alia, its rights and liabilities under 42

U.S.C. § 1981 as well as breach of contract damages.” Id. (citations omitted). This Court denied

Ashenoff’s “motion to dismiss for lack of subject matter jurisdiction,” because “TNA, in addition

to averring a cause of action for breach of contract, seeks numerous declarations as to its rights

and liabilities under 42 U.S.C. § 1981—a federal statute.” Id. at *2. Similarly here, Capital Plus

has challenged the validity of Womply’s Agreements with Blueacorn under federal SBA rules,

and Womply seeks an affirmative declaration interpreting these federal rules in addition to its

contractual claims. Thus, just as in TNA, this Court has subject-matter jurisdiction over Womply’s

declaratory judgment claim.

2
See also Samuel C. Johnson 1988 Tr. v. Bayfield Cnty., Wis., 649 F.3d 799, 801 (7th Cir.
2011) (Posner, J.) (holding that state law quiet-title action “arise[s] under federal law . . . . because
a suit to quiet title is functionally a form of declaratory-judgment action”); Columbia Gas
Transmission Corp. v. Drain, 237 F.3d 366, 370–71 (4th Cir. 2001) (holding that “the district court
possessed subject matter jurisdiction pursuant to § 1331,” because plaintiff “seeks declaratory
relief on a matter . . . arising under federal law”).

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B. This Court Has Jurisdiction Over Womply’s State-Law Claims.

Even if Womply had not moved to file an Amended Complaint asserting a declaratory

judgment claim, this Court would have subject matter jurisdiction over Womply’s state-law

claims. “Supreme Court precedent is clear that a case arises under federal law where ‘the

vindication of a right under state law necessarily turn[s] on some construction of federal law.’”

Bd. of Comm’rs, 850 F.3d at 723 (quoting Franchise, 463 U.S. at 9). “The doctrine captures the

commonsense notion that a federal court ought to be able to hear claims recognized under state

law that nonetheless turn on substantial questions of federal law.” Grable & Sons Metal Prods.,

Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 312 (2005). A federal court has jurisdiction over a

state-law claim “if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial,

and (4) capable of resolution in federal court without disrupting the federal-state balance approved

by Congress.” Gunn v. Minton, 568 U.S. 251, 258 (2013) (citing Grable, 545 U.S. at 313–14).

All four requirements are satisfied here.

1. Womply’s Claims Necessarily Require Interpretation of Federal SBA Rules.

To prevail on its state-law claims against Capital Plus, Womply must show that it entered

into a valid contract with Blueacorn, which “will necessarily require application of” federal SBA

rules to the Agreements. Gunn, 568 U.S. at 259. For example, Womply alleges that Capital Plus

tortiously interfered with its Agreements with Blueacorn. (Am. Compl. ¶¶ 121–30; Pet. ¶¶ 73–

78.) Under Texas law, this requires, inter alia, “the existence of a valid contract subject to

interference.” Cmty. Health Sys. Prof.’l Servs. Corp. v. Hansen, 525 S.W.3d 671, 689 (Tex. 2017).

Womply also alleges that Capital Plus and Blueacorn fraudulently induced Womply to enter into

the Agreements. (Am. Compl. ¶¶ 131–39; Pet. ¶¶ 66–72.) A claim “for fraudulent inducement”

likewise requires “the existence of a valid contract.” Wilmot v. Bouknight, 466 S.W.3d 219, 231–

32 (Tex. App.—Houston [1st Dist.] 2015, pet. denied). Because the validity of the Agreements

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turns on whether they comply with federal SBA rules, “resolution of a federal [] question is

‘necessary’ to [Womply’s] case.” Gunn, 568 U.S. at 259.

2. Womply and Capital Plus Actually Dispute the Interpretation of SBA Rules.

“The federal issue is also ‘actually disputed’ here—indeed, on the merits, it is the central

point of dispute.” Id. Capital Plus argues that “the Womply–Blueacorn contracts as written violate

federal law because the provided fee structure would exceed a clear regulatory cap.” (Notice ¶ 28;

see id. ¶ 44 (“The underlying contract that plaintiff claims was fraudulently induced and/or

tortiously interfered with is illegal under federal law, which caps the fees payable to an entity like

Womply.”).) Womply argues that the SBA’s Agent Fee Cap does not apply to the Technology

Fees under the Agreements because (i) neither Womply nor Blueacorn is a SBA-regulated lender,

(ii) the technology services Womply provided to Blueacorn and Capital Plus, and for which

Womply earned its Technology Fees, are not loan application preparation and referral services,

(iii) Womply was not Capital Plus’s or any applicant’s “agent” as that term is defined by the SBA,

and (iv) the SBA is aware that Womply collects fees in excess of the SBA Agent Fee Cap and it

has not suggested that Womply’s fees violate any SBA rules. (Am. Compl. ¶ 68.) “This is just

the sort of dispute respecting the effect of federal law that [the Supreme Court] envisioned.” Gunn,

568 U.S. at 259 (internal quotation marks and alterations omitted).

3. The Interpretation of SBA Rules Affects Billions of Dollars of Federal Money
under the PPP.

“The substantiality inquiry” looks to “the importance of the issue to the federal system as

a whole.” Bd. of Comm’rs, 850 F.3d at 723 (quoting Gunn, 568 U.S. at 260). “The Supreme Court

has suggested that an issue can be important for many reasons: because state adjudication would

undermine the development of a uniform body of federal law; because the case presents a nearly

pure issue of law that would have applications to other federal cases; or because resolution of the

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issue has broad significance for the federal government.” Id. at 724 (internal quotation marks and

alterations omitted). All of these reasons are present here.

First, this action is of substantial interest to the federal government. This action concerns

fees for more than 86,000 federally guaranteed PPP loans, which total more than $950 million.

(Am. Compl. ¶ 72; Pet. ¶¶ 1, 3, 6, 34.) The SBA has paid Capital Plus approximately $187 million

in fees for funding these loans, and Capital Plus is receiving risk-free interest on these loans

because of the federal government’s guarantee. (Am. Compl. ¶¶ 5–6, 76; Original Pet. ¶¶ 1, 38.)

The SBA also has an ongoing interest in these loans, which it is reviewing for potential forgiveness

under the terms of the PPP and accompanying SBA rules and regulations. (Am. Compl. ¶¶ 1, 26,

51; Pet. ¶ 24.)

Second, the SBA rules at issue in this action “regulate issues of national concern” such that

this “case affects an entire industry.” Bd. of Commr’s, 850 F.3d at 724 (internal quotation marks

omitted). Congress authorized hundreds of billions of dollars for PPP loans to help businesses and

employees through the COVID-19 pandemic. (Am. Compl. ¶¶ 1, 26, 35.) The SBA promulgated

rules and regulations governing PPP lenders’ payments to “agents” and, separately, PPP lenders’

payments to technology service providers. (Id. ¶¶ 27–33, 36.) In reliance on these rules, PPP

lenders paid technology service providers billions of dollars of fees. (Id. ¶¶ 5, 47; Notice ¶ 38.)

Federal jurisdiction lies where, as here, the interpretation of SBA rules “affects an entire industry

rather than a few parties.” Bd. of Comm’rs, 850 F.3d at 724 (internal quotation marks omitted).

Third, this “case presents ‘a nearly pure issue of law’” regarding the interpretation of SBA

rules. Id. (quoting Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 700 (2006)).

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Finally, federal jurisdiction over interpretation of SBA rules avoids the risk that PPP loan

fees will vary by state, and thus promotes “the development of a uniform body of federal law.” Id.

(quoting Gunn, 568 U.S. at 361) (alteration omitted).

4. A Federal Court Interpreting Federal Rules Governing a Federal Program Is
Consistent with the Federal-State Balance Approved by Congress.

This action concerns the interpretation of federal SBA rules governing the implementation

of the federal PPP program. The implementation of a federal loan forgiveness program has not

“traditionally been the domain of state law,” id. (quoting Singh v. Duane Morris LLP, 538 F.3d

334, 339 (5th Cir. 2008)), so federal jurisdiction “would not materially affect, or threaten to affect,

the normal currents of litigation,” id. at 725 (quoting Grable, 545 at 319). To the contrary, “the

scope and limitations of a complex federal regulatory framework are at stake in this case, and

disposition of the question whether that framework may give rise to state law claims as an initial

matter will ultimately have implications for the federal docket one way or the other.” Id.3

II. WOMPLY IS NOT AN “AGENT” UNDER 13 C.F.R. § 103.1(a).

The SBA defines an “agent” as “an authorized representative, including an attorney,

accountant, consultant, packager, lender service provider, or any other person representing an

Applicant or Participant by conducting business with the SBA.” 13 C.F.R. § 103.1(a). The SBA

defines “conduct business” with the SBA to mean:

(1) Preparing or submitting on behalf of an applicant an
application for financial assistance of any kind, assistance
from the Investment Division of SBA, or assistance in
procurement and technical matters;

(2) Preparing or processing on behalf of a lender or a participant
in any of SBA’s programs an application for federal
financial assistance;

3
This Court can also exercise supplemental jurisdiction over Womply’s state-law claims.
28 U.S.C. § 1367.

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Case 3:21-cv-02636-B Document 17 Filed 12/22/21 Page 18 of 22 PageID 242

(3) Participating with or communicating in any way with
officers or employees of SBA on an applicant’s,
participant’s, or lender’s behalf;

(4) Acting as a lender service provider; and

(5) Such other activity as SBA reasonably shall determine.

Id. § 103.1(b).

Womply is not an “agent” under 13 C.F.R. § 103.1(a). Womply is not and never has been

an “authorized representative” of an “Applicant or Participant.” Id. § 103.1(a). Nor did Womply

“conduct business with SBA,” “[p]articipat[e] with or communicat[e] in any way with officers or

employees of SBA on an applicant’s, participant’s, or lender’s behalf,” “act[] as a lender service

provider,” or “prepar[e] . . . on behalf of an applicant an application for financial assistance.” Id.

§ 103.1(b).

Instead, Womply is a technology company that made a Technology Platform available to

PPP lenders, and those lenders—including Capital Plus—used the Technology Platform to

process, fund, and track PPP loans and to manage their PPP loan portfolio. The SBA has made

clear that technology companies like Womply are not “agents” when providing technology

services. The SBA “provide[d] specific guidance on the fees a 7(a) Lender or its Associates may

collect from an Applicant or Borrower in connection with an SBA-guaranteed loan,” and explicitly

stated that “SBA does not consider entities providing technology services that do not include

underwriting to be Agents.” SBA SOP at 176, 179, 185, 194. Womply did not provide Capital

Plus—or any other lender—with underwriting services. (See Order Form §§ 1.1, 2.2; Referral

Agreement § 1.1; see also Referral Agreement at 1 (“Blueacorn and Womply specifically

acknowledge that any third-party lender retains ultimate responsibility for all loan decisions,

including . . . underwriting . . . .) (emphasis added).)

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In addition, the examples of “technology services fees” provided by the SBA are strikingly

similar to the Technology Fees that Womply earned for providing Capital Plus with access to the

Technology Platform. Those examples include “[t]he costs or fees for software or technology used

in connection with preparing SBA loan documents . . . or closing the SBA-guaranteed loan,”

“[a]cquisition costs or fees for licensing software or software platforms to 7(a) Lenders solely for

the purpose of performing administrative functions (not including any underwriting functions),

such as generating SBA-required forms,” and “[f]ees associated with entities that develop systems

or lending platforms to automate the 7(a) Lender’s internal loan decision making process.” SBA

SOP at 179.

As explained in the Amended Complaint, federal regulations do not put a cap on the amount

of technology services fees that a PPP lender may pay a technology service provider like Womply.

Instead, the SBA allows lenders to freely contract with technology service providers for

technology services, but directs that “[f]ees associated with technology services (whether

developed internally or purchased from a third party) . . . may not be passed on to the Borrower

or paid for out of SBA-guaranteed loan proceeds.” Id. (emphasis added).

Capital Plus’s conclusory assertion that Womply was “acting as an ‘agent’ for purposes of

PPP” (Notice ¶ 22) ignores the services Womply provided and is contrary to the plain language of

the Agreements. In providing referral services and separate technology services to lenders,

Womply did not “help[] all the borrowers complete their applications,” or “collect[] supporting

information.” (Id.) The borrowers provided their own information through Womply’s website,

and the Referral Agreement states, in all caps, that “WOMPLY MAKES NO

REPRESENTATIONS OR WARRANTIES ABOUT, AND HEREBY DISCLAIMS ALL

RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF ANY AND ALL

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Case 3:21-cv-02636-B Document 17 Filed 12/22/21 Page 20 of 22 PageID 244

APPLICATION INFORMATION PROVIDED BY AN APPLICANT . . . .” (Referral Agreement

§ 1.2.)

Womply may have acted as a “Referral Agent” to the extent it referred PPP loan applicants

to Capital Plus and other PPP lenders. The SBA separately defines a “Referral Agent” to mean “a

person or entity who identifies and refers an Applicant to a lender or a lender to an Applicant.”

13 C.F.R. § 103.1(f). SBA rules do not mention the defined term “Referral Agent” in connection

with the Agent Fee Cap. But, even assuming the cap applies to fees lenders pay to Referral Agents,

Womply’s fees for referring applicants to Capital Plus are consistent with SBA rules. Under the

Referral Agreement, Womply earned a Referral Fee of 1% of the outstanding balance of each

Womply-referred loan at the time of loan disbursement, which is the amount allowed under the

Agent Fee Cap. (Referral Agreement § 2.2.)

CONCLUSION

For the foregoing reasons, Womply respectfully submits that this Court has subject-matter

jurisdiction over this action and that Womply is not an “agent” under SBA regulations.

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Case 3:21-cv-02636-B Document 17 Filed 12/22/21 Page 21 of 22 PageID 245

Dated: December 22, 2021 Respectfully submitted,

Of Counsel: By: /s/ Jason P. Bloom_________________
Jason P. Bloom
Willkie Farr & Gallagher LLP Texas Bar No. 24045511
Nina Cortell
Alexander L. Cheney (admitted pro hac vice) Texas Bar No. 04844500
One Front Street Haynes and Boone, LLP
San Francisco, CA 94111 2323 Victory Avenue, Suite 700
(415) 858-7400 Dallas, TX 75219
acheney@willkie.com (214) 651-5000
jason.bloom@haynesboone.com
Mark T. Stancil (admitted pro hac vice) nina.cortell@haynesboone.com
Joshua S. Levy (admitted pro hac vice)
1875 K Street, N.W. Attorneys for Plaintiff Oto Analytics, Inc. d/b/a
Washington, D.C. 20006 Womply
(202) 303-1000
mstancil@willkie.com
jlevy@willkie.com

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Case 3:21-cv-02636-B Document 17 Filed 12/22/21 Page 22 of 22 PageID 246

CERTIFICATE OF SERVICE

This is to certify that a true and correct copy of the foregoing document has been served

on the following counsel of record, this 22nd day of December 2021, by using the electronic case

filing system of the United States District Court for the District of Texas:

Terrell W. Oxford, toxford@susmangodfrey.com
Harry P. Susman, hsusman@susmangodfrey.com
Megan Elise Griffith, mgriffith@susmangodfrey.com

/s/ Jason P. Bloom
Jason P. Bloom

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